Fiscal decentralization of public mental health care and the Robert Wood Johnson Foundation program on chronic mental illness.

Organizational change for local mental health systems has been advanced as an important aspect of improving the performance of public mental health systems. Fiscal decentralization is a central element of many proposals for organizational change. We employ data from the states of Ohio and Texas to examine some of the consequences of fiscal decentralization of public mental health care. The data analysis shows that local mental health systems respond to financial incentives, even when they are modest; that fiscal decentralization leads to increased fiscal effort by localities; and that decentralization also results in greater inequality in service between poorer and wealthier localities.